Student Loans Driven by Professor Salaries? Bullshit.

So, over at the Jubilee Now blog, there’s a new post that calls bullshit on the idea that skyrocketing college tuitions and student loans are driven by (the completely understandable and unavoidable) rise in faculty salaries.

Of course, there is a much more straightforward connection between tuition and the availability of student loans. The post includes a nice explanatory analogy:

You don’t need a smoking gun to understand the relationship between access to loans and rising tuition prices. It’s not necessary to prove that colleges made the decision to raise tuition because they knew students could just take out loans. You can see it all right there in the market incentives. It goes back to the concept of “third-party payments” – that is, that if there’s a third party involved a transaction, someone other than the buyer and the seller, it’s going to skew the incentives influencing both.

To see how, let’s do a what-if. Imagine you took an 18-year-old into a grocery store and said, “Okay, you have to decide right now what food to buy for the next four years. Now keep in mind that without food, you’ll die. And that the best food, though it may be expensive, will keep you the healthiest in the long run. If you’re super-healthy, you’ll be successful and paying off the cost of the food will be easy. Here’s a big bucket of money. Now, what do you want to buy?”

What do you think this would do to the cost of food? Do you think stores would rush to stock rice and beans so as to efficiently meet the demand for healthy food? Or would we see a proliferation of gently braised filet of farm-coddled salmon, garnished with an aggression of hand-picked asparagus and a frisson of Himalayan fennel?